Tough questions asked on America's Cup fundraising shortfall

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At a March 13 subcommittee hearing called by Sup. John Avalos, representatives from the city’s Office of Economic and Workforce Development (OEWD), the America's Cup Organizing Committee (ACOC) and others were called upon to explain why coordinators of the prestigious yacht race have failed to reach projected fundraising targets to defray city costs. If the fundraising goals aren't reached, the city’s General Fund could weather a $13 million hit to cover costs for the sailing event.

San Francisco struck an agreement to host the sailing competition in 2010, following negotiations initiated under former Mayor Gavin Newsom with entities associated with Oracle Racing Team, owned by billionaire Larry Ellison. The events will culminate with a sailing match on the San Francisco Bay this coming summer.

Mark Buell, who chairs the board of ACOC, told supervisors original projections had pegged total event revenue at $300 million, with eight to twelve vessels competing in the race. Those projections have decreased dramatically, with only a handful of teams entering and other “unknowns” amounting to the fact that “revenues are not what we had hoped,” Buell explained. Yet he tried to put a good face on it, saying, “All told, I believe that the city will come out whole.”

Kyri McClellan, who became CEO of ACOC just after helping negotiate the deal to bring the America’s Cup to San Francisco at her previous job with OEWD, told supervisors that ACOC had hired a fundraising expert and launched an initiative called ONESF to kick up the fundraising efforts.

She added that Mayor Ed Lee was helping to secure funding commitments for the race, by "holding breakfasts with CEOs" and asking them to commit funding. Lee is “putting in an incredible amount of energy behind this,” McClellan said, “and people are responding.” She said Sen. Dianne Feinstein had also been involved in helping to secure funding for the sailing competition.

San Francisco Controller Ben Rosenfield provided a breakdown of the funding shortfall so far. An economic analysis conducted a year ago found that ACOC had $12 million cash in hand, he said, less than half the $32 million initially projected as what was needed to defray city costs. Only $13.9 million in pledges and documented cash can be accounted for thus far, Rosenfield added, and the committee has raised around $10 million less than it originally planned for at this stage of the game. “We found they’ve fallen short,” he explained. 

McClellan reported that an additional $1.1 million would be coming in, “from donors and pledges, between now and January of 2014.”

Mike Martin, tasked with leading the city’s involvement in the America’s Cup on behalf of OEWD, displayed a slide that seemed to paint a much rosier picture of the fundraising shortfall than the $20 million cited in recent media reports.

The total city budget projection for covering costs of the race is actually closer to $22 million, lower than the initially projected $32 million, according to his slide. So far the city has been reimbursed for $6.8 million of that, he said. But the next line on Martin’s slide subtracted “projected event-related tax revenues” pegged at around $13 million, apparently suggesting that the city would be made whole by increased tax revenue rather than by receiving an actual reimbursement payment to defray city costs. According to OEWD’s calculation, that makes the “remaining fundraising need” only about $2.67 million, according to Martin’s presentation.

“I don’t think it’s been the intent to say, let’s stop there,” Martin explained. “We have a few months to capitalize on the growing awareness and excitement about the event.”

Reached after the hearing, Sup. Avalos did not sound very excited by what he had heard in response to his inquiries. “It seems that the commitments that were made to the board in 2010 … are not being taken seriously,” Avalos said. “Now that they’re coming up short on fundraising efforts, they’re trying to say the General Fund should be subsidizing the cost of the race.”

Comments

Rebecca, don't forget that we also learned today that America's Cup was hit with a $500,000 fine for failing to pay prevailing wage (and paying below minimum wage in many cases) for events related work last year and faces even more fines for non-compliance with local hire requirements.

America's Cup shipped workers here from the East Coast and paid them $9 an hour in most cases.

Yeah, America's Cup is working out great for San Francisco. You would think these guys weren't billionaires!

Posted by dont forget on Mar. 13, 2013 @ 9:51 pm

I guess it's safer for them than on the street.

Posted by lillipublicans on Mar. 13, 2013 @ 10:50 pm

actually, that's the race you are witnessing. they had to downscale even further.

but event organizers still say the new (bike) races will bring in billions and creates millions of jobs

Posted by actually on Mar. 13, 2013 @ 11:17 pm

and will no doubt bring in far more than that in additional spend by the well-heeled crowd who will stay here.

Now, if SF had ever gotten it together to host the Olympics, you'd be looking at more like 1.3 billion.

Ya gotta speculate to accumulate, ya know?

Posted by anon on Mar. 14, 2013 @ 5:55 am

Like to nothing.

If this was such a "world class event" then the billionaires should have no problem coming up with a few million. It's pocket change to them.

Posted by Greg on Mar. 14, 2013 @ 7:53 am

The event will bring $780 million into the city. Revenues will exceed costs. And this is your reaction?

Posted by Guest on Mar. 14, 2013 @ 8:08 am

Argument by waving of the hands.

Posted by marcos on Mar. 14, 2013 @ 8:19 am

It is clear that the business that will accrue to SF will be orders of magnitude more than a petty 13 million, which is why cities always strive to get these kinds of events.

13 million is a bargain.

Posted by anon on Mar. 14, 2013 @ 9:36 am

Waving of the hands is what people do when they cannot make their case on the merits.

Posted by marcos on Mar. 14, 2013 @ 10:07 am

you and Lilli both do that, i.e. just keep repeating the same statements regardless of any point anyone else makes. The left is notorious for intolerance and suppression, and you're a good example.

Posted by anon on Mar. 14, 2013 @ 10:28 am

These numbers are pulled out of the ass of some PR firm flunkie. These things never work out the way they're sold.

Think people! Why the hell would we just accept at face value some number made up by the very same people who are promoting this little billionaire's boat race?

Posted by Greg on Mar. 14, 2013 @ 6:48 pm

The Chron reports today that both fundraising among the reech and revenue estimates are much less than planned, and a shortfall of at least $14 million still looms ahead.

Surely Billionaire Ellison can afford to cover the shortfall with some of his own pocket change.

This event was his idea in the first place, an Ego-Stroking Opportunity.

He should pay the difference

Posted by Troll the XIV on Mar. 14, 2013 @ 8:00 am

Ellison's dry-fucking of the many "little people" who will have to pony-up their lunch money to pay for his fun.

Ellison is *only* happy if he's dicking *you.* That's an occupational hazard of being filthy fucking rich.

Posted by lillipublicans on Mar. 14, 2013 @ 8:12 am

>Avalos said. “Now that they’re coming up short on fundraising efforts, they’re trying to say the General Fund should be subsidizing the cost of the race.”

That isn't an honest representation. Nobody is happy about the downsizing of the event and its impact but what the numbers are saying is that, as things stand now, the city would have to spend about $16 million but they would get about $13 million in tourism tax revenue so, at the end of the day, the city would be out about $3 million, based on funds already raised. And everyone agrees that local businesses would make a lot more than $3 million.

So it certainly isn't the great thing that we were told about. When you take chances things often don't work out as planned. But it also isn't looking like it's going to be the sizable disaster that would have kept Tim and Steve happy for years.

Posted by Troll on Mar. 14, 2013 @ 8:05 am

The facts and figures do not concern them so much. And if it were 13 million on an art centre for disabled homeless lesbians, they'd be all for it.

Posted by anon on Mar. 14, 2013 @ 9:38 am

by tax revenue-generating tourism which has displaced by the AC.

I also very much doubt the figures since the Oracle guys aren't all living in fancy hotels paying the 15% tourist tax.

Posted by lillipublicans on Mar. 14, 2013 @ 11:19 am

The benefits are not just the direct tax revenues from hotel taxes, but also sales tax from discretionary spending and payroll taxes for the xtra staff hired or hours worked.

So it is tough to compute the net gain, but the fact that cities fight for the right to host such events show that there are intangible benefits as well as the obvious ones.

Posted by Guest on Mar. 14, 2013 @ 11:25 am

simply means that men of wealth and power are widely aware and capable of excercizing control over local government because they know that every time the public purse is opened that money can be made to spill out into their pockets.

Posted by lillipublicans on Mar. 14, 2013 @ 11:36 am

It's going to cost the city some money - we are just quibbling over how much.

Clearly the city wants this. It wants it for nothing, of course, but the real question is how much they want it, and we only discover that by seeing how much the city is willing to spend.

Posted by Guest on Mar. 14, 2013 @ 11:44 am

Good question. The city originally wanted the AC because it was projected to be a bigger draw than it now appears to be and that contributions would cover all of their investment.

Right now things have been downsized and the city is looking at a layout of $16 million partially offset by tourist taxes of $13. And there is a pretty good chance that they'll be able to raise at least the $3 million dollars in the remaining weeks.

Even Avalos admits that there will be a huge benefit to the local economy for what could be, at worst, a $3 million investment. Chiu also.

Posted by Troll on Mar. 14, 2013 @ 12:09 pm

intangible benefits i.e. the value of factors that cannot be directly measured but do nonetheless accrue to the host.

Posted by Anon on Mar. 14, 2013 @ 12:20 pm

Usually the host ends up with a bit less blood -- or maybe none at all.

Don't forget about the real estate development rights Ellison bargained for.

Posted by lillipublicans on Mar. 14, 2013 @ 7:10 pm

Argument by "waving of the hands."

"So it is tough to compute the net gain, but the fact that cities fight for the right to host such events show that there are intangible benefits as well as the obvious ones."

Demand does not indicate value it indicates demand.

Posted by marcos on Mar. 14, 2013 @ 11:38 am

Lilli, come on, meds please. This is absolutely incoherent, even by your standards.

'tax revenue-generating tourism which has displaced by the AC' ????

Posted by Troll on Mar. 14, 2013 @ 12:03 pm

I doubt he can hold down a job and the fact that he is here all day every day appears to back that up.

Posted by Anon on Mar. 14, 2013 @ 12:15 pm

is that you can't resist hitting him with an ad hominem attack.

Posted by Guest on Mar. 14, 2013 @ 12:21 pm

As if we can't see thru your shallow games.

Posted by Anon on Mar. 14, 2013 @ 12:32 pm

Posting as Anon again, anon?

Posted by marcos on Mar. 14, 2013 @ 12:43 pm

Easy mistake to make.

Posted by Anon on Mar. 14, 2013 @ 12:58 pm